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Penalty for cancelling Airbus deal accounts for 33% of UL losses

SriLankan Airlines has paid Rs. 18.8 billion as part of a penalty for the cancellation of the four Airbus A350-900 leases in the 2015/2016 and 2016/2017 financial years, Presidential Commission of Inquiry (PCoI) on irregularities at SriLankan Airlines, SriLankan Catering and Mihin Lanka was told yesterday.

Yasantha Dissanayake, the Head of Financial Management at SriLankan, told the PCoI the penalty accounted for one third of the losses incurred by the airline betweenthe2014/15 and 2016/17 financial years.

SriLankan incurred losses of Rs. 57 billion in those three financial years. We also lost about Rs. 2.5 billion during the renovation of the airstrip at BIA in 2017, he said.

The losses during those three financial years were significantly lower than the losses the airline had incurred between the 2011/12 and 2013/14 financial years. The airline lost Rs. 75.4 billion in those three years.

In 2013, the previous management of SriLankan decided to purchase new A350 wide-body aircraft. In 2016, the management, appointed by the new government, cancelled the first four Airbus A350-900 leases. It was speculated that SriLankan would have to pay USD 170 million as a penalty.

Appearing before the PCoI earlier this month Upul Kumara Dias, Manager Offshore Branch of the Bank of Ceylon (BoC), said that his bank had given the airline a dollar loan to the tune of USD 32.5 million on May 26, 2016 to pay part of a penalty for the cancellation of the four Airbus A350-900 leases. SriLankan received another USD 35 million from the Peoples Bank for the same purpose. The national carrier has not repaid the loan yet.